Wholesale Oregon Basics

29 Replies

All-I've flipped properties a few years ago in Oregon and I'd like to take a turn at wholesaling.  My wife is a new broker and though we've been researching the details, our core questions are-Is it legal in Oregon if you aren't a broker and do we need to keep the two entities separate?  What is the best way to develop the best contracts?  Why should or shouldn't I move forward?  Any feedback would be appreciated.  Thank you!-Luke

Originally posted by @Benjamin Ulloa :
@Luke Lesh yes it’s legal if you’re not a broker. I’m an agent and investor and have bought properties from wholesalers with and without their license

not correct  see below from the state of Oregon real estate investigator.

the way wholesaling is taught IE selling contracts or advertising properties you do not own and just have in contract is not legal.

however buying the properties first then reselling is for sure legal I have been doing it for 4 decades.

also in Oregon keep in mind if you doing ANY work on the homes and then selling to the public you need a Developers license , which to get one is simple.. you just need a bond and insurance in the name of the entity that is taking title.. learned this one the hard way with a 5k fine. 

See below an e mail I got from the state of Oregon regarding selling real estate you don't own without a license.

530 Center Street NE, Suite 100, Salem, OR 97301

State of Oregon - Real Estate Agency

Frances Hlawatsch | Financial Investigator

Best regards,

Thank you again for the information, if I have further questions for you during the investigation I will certainly reach out.

The Agency is well aware that unlicensed “wholesalers” are rampant in our jurisdiction. Addressing the problems is like trying to put out small individual fires in a forest that is burning. The Agency’s investigations are complaint driven, so we rely heavily on the public, and our licensees to bring these individuals to our attention.

Thank you for getting back to me. The advertising copy you attached to your email came out perfectly and will be very helpful. Thanks!

Benjamin, thanks for the response.

Jay, that is great information to know regarding the need for a brokers and developers license.  I had my GC license when I was flipping houses a few years ago and used a broker to sell them, but great to know.

Are you aware of a law on Oregon's "books" that states the act of "wholesaling" is illegal?

Originally posted by @Luke Lesh :

Benjamin, thanks for the response.

Jay, that is great information to know regarding the need for a brokers and developers license.  I had my GC license when I was flipping houses a few years ago and used a broker to sell them, but great to know.

Are you aware of a law on Oregon's "books" that states the act of "wholesaling" is illegal?

 the act of "wholesaling" has many definitions.

I was a major wholesaler I bought all my inventory at the courthouse steps for cash then sold it off as is.. that is what most of the bigger quote un quote wholesalers do in Oregon.

what you cannot do is have a business or scheme that is taught by many on BP or gurus.. were you just put properties into contract.

advertise them on your website or craigslist or send them out to your buyers list.. then charge an assignment fee .. that is selling real estate without a license.. there is no clear definition of wholesale as it relates to real estate only what you see posted on line.

but just contact the state and talk with them.. they are the gate keepers.

@Luke Lesh No I was not aware of that to be honest, so everyone currently wholesaling is doing it illegally? Then why are title companies in Oregon also compliant with double closings and know it is wholesaling? This is all new to me I had no idea that Oregon does not like wholesalers
Originally posted by @Benjamin Ulloa :
@Jay Hinrichs Interesting stuff, great to know Jay I appreciate this! I have 2 flips going on and I have my GC license as well but i will take out a developers license soon lol

 if your a licensed GC and you OWN the property you don't need a developers license.. just call down to the CCB and talk with them they will walk you through it.. 

since I am NOT a GC I need a developers license.. but that license does not allow me to build ground up new construction ONLY rehabs. 

its a tad complicated in Oregon and boy let me tell you, you don't have the proper license this state is small enough and they will find you and they will fine you.. I know its happened to me personally and many I know.. 

the developers license is tuff to know about because I don't know any other state that requires it or has that particular license.. I probably did 200 flips before I realized I needed It.. 

but its just been in the last 5 years that CCB has really cracked down on this.. I know I have been fined twice.

LOL

Hmmm, I wasn't aware wholesaling in Oregon was "illegal".  I'd like to insure I go about business ethically and legally, so obtaining the appropriate license is appropriate.

That being said, I'd like to know where there is a law or regulation from the state or real estate agency the clearly states "wholesaling" is illegal.

Thank you both for the information, much appreciated.

Originally posted by @Benjamin Ulloa :
@Jay Hinrichs Well I appreciate all the information Jay! I’m still a young cat in this business and am always learning something new everyday!

 I have 4 decades at it and I learn something new every WEEK... that's the great thing about our industry.. NO ONE knows it all. 

ever been in a law library ???  How can anyone know it all ???

@Benjamin Ulloa @Jay Hinrichs Actually.... If "YOU" as the owner of the property are an LLC etc., even if you are a GC, you must still get a developers license if you are rehabbing or building new with the intent of selling the property. You're also not allowed to go work on your own jobs unless you're a licensed GC and if you're an owner but not a GC you have to be working as an employee of the GC on the permit. It's crazy.

Though my son and I are partners in the projects, we own the real estate in our LLC. I'm not even allowed to call and get bids, schedule subs, etc. unless our LLC is licensed as a developer and as the developer I can call, or I am actually an employee of my son the GC . We found out the hard way and got fined. Oregon is tough!!

Originally posted by @Karen Margrave :

@Benjamin Ulloa @Jay Hinrichs Actually.... If "YOU" as the owner of the property are an LLC etc., even if you are a GC, you must still get a developers license if you are rehabbing or building new with the intent of selling the property. You're also not allowed to go work on your own jobs unless you're a licensed GC and if you're an owner but not a GC you have to be working as an employee of the GC on the permit. It's crazy.

Though my son and I are partners in the projects, we own the real estate in our LLC. I'm not even allowed to call and get bids, schedule subs, etc. unless our LLC is licensed as a developer and as the developer I can call, or I am actually an employee of my son the GC . We found out the hard way and got fined. Oregon is tough!!

its so friggin confusing I am looking at my table were I have all my licenses in frames.. mortgage bankers.. brokers... 3 developers license for 3 LLC.. I am buying a 90 lot project in Canby in the fall so I will have to get another license for that.. then in some cities you need a business licenses we get licensed to death here in this state .. at least to do it right.. and were it can bite you is if you have a problem with a buyer.. first thing their attorney is going to do is check to make sure you were licensed..

the selling of real estate ( emulating a REal Estate broker) simply is not legal in this state.. its not legal really in all states.. but some just don't care and don't enforce the laws on the books.. some do though.   ERGO wholesaling contracts and advertising like realtor is rampant just like state of Oregon said..  I had one vendor in Mississippi learn the hard way.. he got turned in massive fine he had sold a few hundred homes without a license.. just like those little mom and pops that manage homes without a license.. they get caught they are in major trouble.

Originally posted by @Luke Lesh :

There is a post from 2014 titled "Wholesaling-Legal in Oregon?", quite a few posts with multiple views...

 ONLY view point that matters is the state regulators.. end of that discussion.. this is the hottest debate on BP.. bar none.

@Luke Lesh as @Jay Hinrichs said, the only view that matters is the States, and believe me, they are not giving grace to non licensed brokers, contractors or developers. In their eyes, if there's a question, you need a license, bond and insurance ... or pay the fines!! 

@Karen Margrave agreed, I’d just like to feel more comfortable about the wholesale concept assuming I had a brokers license and a developers license, not sure exactly where to get 100% clarity on the law/statute/regulation, etc.

@Luke Lesh It's confusing for sure. I had no idea there even was a thing called a developers license until we got fined! I thought as an owner you could work on your property... but not if it's owned as an LLC and you're planning to sell it!

Originally posted by @Luke Lesh :
@Karen Margrave agreed, I’d just like to feel more comfortable about the wholesale concept assuming I had a brokers license and a developers license, not sure exactly where to get 100% clarity on the law/statute/regulation, etc.

 Luke this is quite easy.. just hop in your car drive 20 minutes south to Salem walk into the CCB they are really nice at the counter tell them what you want to do and they will tell you what you need  simple as that.. 

same with selling real estate without a license simply walk over to the DRE and someone at the counter will help you. I posted what the state sent me.. and in reality if we can all be fake realtors advertising properties we don't own.. then why need a real estate industry at all .. I don't love being licensed its just the law.. Its kind of like the Cowboys I see at the airport who fly for 20 years on a student pilot license ( I guess at least they have that) or fly with their medical out of date.. can you do it sure is it legal NOPE  you get caught you lose your license..  Now that guy up in Seattle who did the barrel rolls in the Q 400 now that was something.. and there was a kid called the barefoot bandit who had no formal training in flying that would steal Cirrus airplanes ( the plane we fly)  you can kill yourself real quick in those but somehow Darwin theory never evolved for him and he ended up in Jail.

The state wants to make an example out of you for violating the laws on the books and you can count on draining your savings.. Believe me been there done that.. 

@Jay Hinrichs , interesting Jay, I didn’t realize there was a developers license in Oregon. I am a lIcensed GC, but the properties I buy and sell, I try and keep my license out of it and remodel it as an owner. Then I can do minor plumbing and electrical ;-) . Do you just need the developers license for large multi family when hiring subcontractors?
Originally posted by @Randy Gleysteen :
@Jay Hinrichs, interesting Jay, I didn’t realize there was a developers license in Oregon. I am a lIcensed GC, but the properties I buy and sell, I try and keep my license out of it and remodel it as an owner. Then I can do minor plumbing and electrical ;-) . Do you just need the developers license for large multi family when hiring subcontractors?

 you need it for any property from an out house to  a large project..  but being a GC I believe your fine.. as long as you vest the property in your company name that has the GC license if your vesting in your personal name then I think you need a developers license the subsequent bonds and insurance.. but you can talk to the CCB to clear up whats needed what happens though is if you get in a dispute and they turn you in.. YOU WILL GET a fine and depending on how they want to handle it .. can be 1k minimum to 5k max.. I have been tagged with both  LOL... and of course you can hire an attorney to fight but you never do you will spend more on them then what the fine is and they know it..   What happens to is others that have gotten fined don't like it and they are the ones that turn you in.. 

I know like at the court house steps sales when outside lenders came into the market without proper state  of Oregon licensure the other lenders were turning them in left and right.. 

@Luke Lesh you won't find anything in the ORS that states specifically "wholesaling is illegal". Reason being, "wholesaling" is not a defined real estate term. It's used all the time, but wholesaling happens in all sales industries and all states. It's a simple term, not a recognized real estate term. Hence it's not in our statutes. 

Oregon has a "definition of real estate activity" and "wholesaling" as taught by gurus, does in fact fit in the "definition of real estate activity" per the State of Oregon. So if you're wholesaling, without a license, you are breaking the law. In fact, even if you do have a license, "wholesaling" as taught by a guru is probably illegal as well. 

It really all comes down to marketing. You cannot market a property you do not own without a real estate license. That is clear as day and night in the Oregon statutes. This fact gets argued all the time on BP, but it isn't even debatable in my opinion. The whole "buyer's list" discussion pretty much makes it black and white to me. 

Now, "Assigning" a property is legal and will be facilitated by local title companies. It's the "marketing a property you do not own" (or have a listing agreement with the owner) in order to do that "wholesale" that breaks the law.